Policy Research Institute Executive Director and BRAC Bank Chairman Ahsan H. Mansur on Thursday said the banks’ lending capacity went down alarmingly due mainly to their soaring defaulted loans.
He said the private sector credit growth came down to 10% to 11%, which was a matter of great concern.
The economist was addressing a two-day annual banking conference at the Bangladesh Institute of Bank Management (BIBM) at Mirpur in Dhaka.
The problem of banking sector was not recognized much by the government, policy makers and also by its regulator, said Ahsan H. Mansur. He hopes the government will look into the matter seriously for the sake of banking industry and overall economy.
“Economic growth cannot be sustained at 8% plus for long time unless our financial sector is fixed.”
He said the banking sector was at an alarming situation because the country’s overall bad loans was Tk2,50,000 crore, not Tk1,12,000crore, as reported by the Bangladesh Bank.
“According to Bangladesh Bank, it is (non-performing loans) at 11% something but according to the IMF report, it is more than 20% to 24%,” he added.
Ahsan H. Mansur said although the banks could not recover the bad loans, they were surviving on huge deposits. If the deposit growth collapsed further, the banks could not repay the depositors’ money, he pointed out.
“Now it has happened in the case of People’s Leasing. It has happened with few other leasing companies, however they are not declared officially insolvent but they are insolvent. That was happened in Padma Bank and now many other banks are also under stress,” said the economist.
Bangladesh Bank (BB) Deputy Governor Ahmed Jamal said in his inaugural speech that “The financial inclusion and access to finance are two core components of digital financial services and sustainable growth. Digital financial services help to ensure these sustainable financial services.”
“Moreover digitalizing financial services is our national priority. In this case, MFS, agent banking and apps- based banking have already initiated a revolution in the country,” said BB Deputy Governor.
He added that through the multifaceted financial inclusion initiatives, Bangladesh Bank was enhancing the intermediate target of reducing financial inequality with an ultimate objective of slimming income inequality down with job creation among the un-served and under-served population segments.
BIBM professor Md. Nehal Ahmed said that risk management was a vital area in the banking sector.
“Venture capital and investment funding should be effective for beneficiaries. Private sector initiatives for making alternative financing association may be considered. Alternative financing institutes should make an association for better research and collaboration so that this sector can flourish,” Bangladesh Bank assistant director Julker Naim said in his paper titled, “Venture capital financing: international experience and Bangladesh perspective”.
Annual Banking Conference-2019 organizing committee chairman Shah Md. Assan Habib gave the welcome speech in the 2nd day inaugural session.
BIBM chair professor Dr. Barkat-e-khuda presented the key note paper and BIBM Director General Md. Akhtaruzzaman chaired the 2nd day inaugural session.
Centre for Policy Dialogue (CPD) Research Director Dr. Khondakar Golam Moazzem, Independent University, Bangladesh Professor Dr. Sarwar Uddin Ahmed, BIBM professor Md. Nehal Ahmed and BIBM Professor and Director Dr. Prashanta Kumar Banerjee were spoke at the panel discussion.
